Bristol-Myers lifts offer for ImClone, turns to holders

ImClone Chairman Icahn deems hostile bid "absurd"

By

RobertDaniel

ValBrickates Kennedy

BOSTON (MarketWatch) -- Bristol-Myers Squibb Co. said on Tuesday that it increased its acquisition offer for ImClone Systems Inc. to $62 a share cash from $60 and will take the bid directly to shareholders of the oncology-drug specialist.

In addition, Bristol-Myers Squibb
BMY, +1.26%
said it will launch a proxy fight for control of ImClone's board, which has been chaired by activist investor Carl Icahn since late 2006 following a protracted battle with management.

In a statement late Monday, the New York health-care giant valued the revised proposal at $4.7 billion for ImClone holders other than itself. Bristol-Myers currently owns 16.6% of ImClone
IMCL
which currently has just one product on the market, the oncology treatment Erbitux.

Shares of ImClone traded up about 6% at $63.00 in late afternoon trading.

Erbitux is marketed by Bristol-Myers in the U.S. and by German conglomerate Merck KGaA
MKGAY
overseas. In addition, European conglomerate Sanofi-Aventis
SNY, -0.85%
holds a key patent for Erbitux.

Bristol-Myers made its initial $60-a-share bid at the end of July. Early in August, ImClone said the figure substantially undervalued the company.

And on Sept. 10, ImClone said that a company it didn't identify proposed to pay $70 a share. That statement said the company would enable this bidder to conduct a due-diligence review of New York-based ImClone's books for two weeks. ImClone also said then that it hadn't determined whether $70 a share would be an adequate deal price.

Bristol-Myers Squibb said the $62 deal price is 48% over the average closing price of ImClone stock in the three months through July 30, the last trading day before the $60 offer was made.

In an open letter to Bristol-Myers Chairman James Cornelius released Thursday afternoon, Icahn denounced the hostile bid as "absurd" and accused the drugmaker of misleading ImClone shareholders.

"During the last few weeks we told you we would be happy to meet if you wished to increase your offer to which you replied you had no intention to do," wrote Icahn to Cornelius.

"I also told you a large Pharma company had offered $70 subject to due diligence and the diligence will be over on Sunday, September 28, 2008. In light of these facts, your hostile tender of $62, at this time, seems absurd," Icahn added.

The Bristol-Myers bid is just the latest chapter in ImClone's on-going saga. In early 2006, ImClone put itself up for sale, citing increasing market competition for Erbitux.

However, it took itself off the block that August, after accusing Icahn and his associates of derailing a proposed buyout offer by Sanofi-Aventis for $36 a share.

At the time, Icahn, who had taken a roughly 16% stake in the company, defended his resistance to the deal, stating the bid was too low.

Shares of Bristol-Myers were down almost 1% at $20.49, while Sanofi's U.S.-listed shares declined marginally to $33.15.

ImClone also grabbed headlines earlier this decade when former CEO Sam Waksal and friend Martha Stewart were sent to jail for allegedly engaging in inside trading of ImClone shares.

Suitor shows impatience

In a Sept. 22 letter to ImClone's board, Bristol-Myers Chairman and Chief Executive James Cornelius said that while its advisers have contacted their ImClone counterparts, "there has not been any meaningful dialogue regarding our proposal.

"Nearly two months have elapsed since we made our initial offer, and it has been nearly two weeks since your disclosure that an unnamed bidder had submitted a conditional preliminary proposal to acquire ImClone."

The letter, sent in care of Icahn, also said, "These delays, combined with ImClone's lack of transparency, have created a protracted period of uncertainty among your stockholders, employees and other constituents which could hurt the intrinsic value of ImClone's assets."

"Bringing our offer directly to the company's stockholders allows them to evaluate the merits of our proposal and permits them a say in the future of their company, an approach I know you support."

Bristol-Myers said it stood ready to discuss its bid and reach a definitive agreement. "Our offer is not subject to due diligence or financing," the letter said.

For ImClone stockholders, Bristol-Myers said, making a deal gives them a substantial premium for their shares "while avoiding the significant regulatory and financial investment required to maximize the value of the company's undeveloped early-stage clinical and preclinical compounds which are not yet commercially viable."

In his reply Thursday, Icahn denied stonewalling Bristol-Myers.

"Your letter of yesterday contains inaccuracies which are misleading to our shareholders. Your statements that there have not been any meaningful discussions concerning your proposal have no basis in fact," Icahn stated.

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